http://imedia.vuse.vanderbilt.edu/mt322/library.htm#Module 2

Pareto Diagram

Pareto Diagram. Pareto diagrams are named after Vilfredo
Pareto, an Italian sociologist and economist, who invented this method
of information presentation toward the end of the 19th century. The chart
appears much the same as a histogram or bar chart, except that the bars
are arranged in decreasing order from left to right along the abscissa.
The fundamental idea of use of Pareto diagrams for quality improvement
is the ordering of factors that contribute to a quality function.

Pareto Chart

Definition:A bar graph used to arrange information in such a way that priorities
for process improvement can be established.

Purposes:To display the relative importance of data.
To direct efforts to the biggest improvement opportunity by highlighting
the vital few in contrast to the useful many.

How to Construct:

Determine the categories and the units for comparison of the data, such
as: frequency, cost or time.

Total the raw data in each category, then determine the grand total by
adding totals of each category.

Re-order the categories from largest to smallest.

Determine the cumulative percent of each category, (the sum of each category
plus all categories that precede it in the rank order, divided by the grand
total and multiplied by 100.)

Draw and label the left-hand vertical axis with the unit of comparison,
such as frequency, cost or time.

Draw and label the horizontal axis with the categories. List from left
to right in rank order.

Draw and label the horizontal axis from 0 to 100 percent. the 100 percent
should line up with the grand total on the left-hand vertical axis.

Beginning with the largest category, draw in bars for each category representing
the cumulative present of the total.

Draw a line graph beginning at the right-hand corner of the first bar to
represent the total as measured on the left-hand axis.

Analyze the chart. A break-point in the cumulative percent line can indicate
the vital few from the awkward zone and the useful many.

Tips:

Create before and after comparisons of Pareto charts to show impact of
improvement efforts.

Pareto charts are useful displays of data for presentations.

Use objective data to perform Pareto analysis rather than team members
opinions.

if the data does not indicate a clear distinction among the categories
-- if all bars are roughly the same height or half of the categories are
required to account for 60 percent of the effect -- consider organizing
the data in a different manner and repeating Pareto analysis.

Pareto analysis is most effective when KQC is defined in terms of shrinking
the PV to a customer target. For example, reducing defects or elimination
the non-value added time in a process.